Tech Solutions for SME Financing

Financing can be difficult for Small-Medium Enterprises (SMEs) in Singapore. The top finance-related challenge in 2017 cited by Spring Singapore was managing delays in customers’ payments. Still, many SMEs have revealed their reluctance to turn to external financing, and indicated sufficient funds to operate.

There are three salient points to take away for financing solutions for SMEs.

1. Online Debt Financing

Some SMEs may be unprepared or ineligible to actually borrow from more established financial institutions, due to the fund size, or credit worthiness, amongst other reasons. Fortunately, there are platforms providing an online debt financing service between willing investors and promising businesses that can help these businesses thrive.

2. Online Invoice Financing (Factoring)

The SME Development (SMED) Survey revealed that delays with invoice payments has increased dramatically from 14% in 2016 to 81% in 2017. With online invoice financing (or factoring), Capital Match is one such company that eases cash flows for the SME by converting outstanding invoices due within 90 days into immediate cash. The SME will then be able to keep working capital afloat and better manage cash flows during the repayment period.

3. Leverage Line of Credit

The common thread that strings all SMEs is that small businesses typically do not need a large sum for the long term. Instead, SMEs demand greater accessibility to smaller amounts to cover the cost of revenue, rental expense, and pay salaries for instance. Companies generally underutilise their pre-approved line of credit as the said expenses are usually paid for via bank transfer, cash, or cheques. SMEs can better leverage on their assigned line of credit to extend their payables period by up to 55 days, thereby improving short-term cash flows significantly.

Above are three tech-related solutions that can eliminate, or at least reduce inefficiencies in cash flow management by SMEs, and is done primarily through automation of such processes. SMEs must weigh the pros and cons of the time-money tradeoff and be transparent while reducing reliance on external financing, to focus on what is truly important – the growth of the business.